(Bloomberg) — It's a dream for many, but a trend that supports earning and saving enough money to quit a soulless day job and retire early has inspired a pair of new ETFs.
Scan any TikTok or Instagram feed lately and you'll be filled with tips on how to achieve your Financial Independence goals Retire early, or FIREmovement. On Tuesday, Tidal Investments presented first ETFs – FIRE Funds Wealth Builder ETF (FIRS) and FIRE Funds Target Income ETF (FIRI) – to cater directly to those looking to achieve that jobless lifestyle.
“The FIRE community has been ignored by Wall Street and is such an amazing group of do-it-yourselfers,” said Michael Venuto, Tidal's co-founder and chief investment officer. “This is our way of introducing ETFs beyond the Vanguard S&P 500 to the FIRE community.”
The move has become increasingly popular with the day trading crowd. FIRE advocates on sites like Reddit, where r/financialindependence has 2.3 million members, urge would-be savers to put away half their wages during their early working years, with the goal of building enough of a financial cushion to been able to retire while still relatively young.
But this is a mammoth task for many Americans where they live pay check is often the norm. A large proportion of Americans, increasingly older, have no money saved for retirement – making it an almost impossible goal for many. The typical person thinks they need $1.5 million to retire — about 17 times more than the average $88,400 saver — a study showed.
And some ETF experts are skeptical given the mixed performance of thematic strategies. According to Ben Johnson, head of client solutions at Morningstar, investment approaches based on acronyms tend to have a poor track record of delivering returns to investors.
“The link between these funds' investment strategies and the FIRE acronym appears to be more of a marketing tactic than a fundamental contribution to their investment processes,” he said. “The Wealth Builder Fund appears to be a rebranding of risk parity.”
FIRS would be a fund of funds, which would hold other ETFs targeting four categories: equity-focused prosperity, gold-leaning recession, short-term Treasuries-focused inflation and also deflation-targeted bonds, according to a filing .
Johnson was also skeptical of the FIRI product, an actively managed fund that targets a 4% yield. That, Johnson said, can be “a really risky strategy in an environment where interest rates or dividend yields on quality assets tend to be below the target rate of payment.”
However, both funds offer some advantages, especially for ETF issuers who decide to work with Tidal.
“We're doing this for Tidal customers,” Venuto said. “These ETFs will primarily buy ETFs of Tidal customers. So if you become a Tidal customer, you have the opportunity to get involved in FIRE ETFs.”
Another feature may attract investors: Tidal isn't charging a fee for either product.